Two Growth Stocks Expected to Surge 56% and 60%, Recommended by Wall Street Analysts

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Two Growth Stocks Expected to Surge 56% and 60%, Recommended by Wall Street Analysts

The U.S. stock market has climbed over the past year, but Wall Street still sees buying opportunities. J.P. Morgan analyst Cory Carpenter gave Year (NASDAQ:ROKU) a target of $100 per share, implying a 56% upside from its current price. Morgan Stanley analyst Keith Weiss set an upside target of $485 per share for Selling power (NYSE:CRM)which implies a 60% increase from its current price.

Investors should always view price targets with skepticism, especially when they come from individual analysts. But Roku and Salesforce deserve deeper consideration. They hold strong positions in their respective markets and both stocks trade at reasonable valuations relative to future growth prospects.

Here’s what investors should know.

1 year

Roku announced disappointing financial results during the fourth trimester. Revenue increased 14% year over year to $984 million, but average revenue per user declined 4% to $39.92. Management attributed this to strong growth in active accounts in international markets, where the company is still focused on growth rather than monetization. But it could also signal a loss of pricing power due to competition from rivals. streaming platforms like Amazon And Netflix.

At the same time, the company reported a generally accepted accounting principles (GAAP) loss of $0.55 per share, but Wall Street expected a slightly lower loss of $0.52 per share. Management also projects a wider-than-expected loss of $0.90 per share in the first quarter. Despite this, Roku remains confident in its ability to accelerate sales growth and achieve profitability in the future, and its strong competitive position in the growing connected television (CTV) advertising market supports this belief. .

Roku is the leading streaming platform in the United States and Mexico in terms of viewing hours, and Roku OS was the best-selling TV operating system in the United States, Canada, and Mexico. last year. Additionally, its ad-supported streaming service, The Roku Channel, is the ninth most popular streaming service in terms of watch time. This places it ahead of Paramount+ by Paramount Worldwide.

In short, Roku is well-positioned to benefit as media streaming replaces traditional pay TV. This is especially true in its largest market, the United States, where CTV’s ad spending is expected to grow 15% annually through 2027, according to Statista. Roku has a good chance of keeping up this pace with its sales growth, making its current valuation of 2.6 times sales quite reasonable.

Investors should monitor average revenue per user over the coming quarters. Continued declines would further reinforce the idea that Roku is losing its pricing power. But investors who accept this risk should consider purchasing a small position in this stock today, with the understanding that a 56% return over the next 12 months is by no means guaranteed. Revenue growth would need to accelerate and profitability would need to improve significantly for this outcome to be likely.

2. Sales force

Salesforce reported strong fourth-quarter financial results, beating expectations for both revenue and bottom line. Revenue increased 11% year over year to $9.2 billion due to particularly strong growth in data integration and analytics solutions. Meanwhile, non-GAAP (adjusted) net income increased 36% to $2.29 per diluted share as the company continued to focus on expanding its margins.

Additionally, management said its remaining performance obligation (RPO) increased 17% year-over-year in the fourth quarter. RPO measures contracted revenue that has not yet been recognized, making it a good indicator of sales pipeline dynamics. The fact that RPO is growing faster than sales suggests a possible acceleration in revenue growth in the coming quarters. Regardless, investors have good reason to be optimistic.

Salesforce is the market leader in customer relationship management (CRM) software. Its platform includes applications that help sales, marketing, commerce and customer service teams work more productively. Salesforce also sells analytics, application development and data management tools, and recently launched a generative artificial intelligence assistant called Einstein Copilot that can answer questions, summarize content and surface insights.

The broad reach of the Salesforce CRM platform gives the business a huge advantage, creating multiple ways to attract new customers and expand those customer relationships over time. Angelo Zino, an analyst at CFRA, recently wrote that Salesforce offers “the most comprehensive and feature-rich CRM platform” for mid-sized and large businesses.

With this in mind, Grand View Research estimates that CRM spending will grow 14% annually through 2030. Salesforce is arguably better positioned to benefit from this tailwind than any other software company. Wall Street expects the company to grow revenue 10% annually over the next five years. But I think this estimate leaves room for upside if Einstein Copilot becomes a significant revenue generator.

Regardless, the current valuation of 8.6 times sales is tolerable compared to the sales growth predicted by Wall Street analysts. Investors should consider buying a small position today, but not expecting a 60% return next year. Salesforce is best viewed as a long-term investment, meaning investors should plan to hold it for at least three to five years.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions on Amazon and Roku. The Motley Fool holds positions and recommends Amazon, JPMorgan Chase, Netflix, Roku and Salesforce. The Motley Fool has a disclosure policy.

2 Growth Stocks to Buy Before They Soar 56% and 60%, According to Some Wall Street Analysts was originally published by The Motley Fool

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